Charter Hall Retail REIT (REIT) has delivered solid operating earnings growth of $86.3 million, which was mainly driven by its Australian portfolio.

The REIT’s Australian portfolio is geographically diverse, with exposure to key markets along the eastern seaboard and across a number of key growth regions in Western Australia and Queensland.

The company, completed 241 leasing transactions across the portfolio, delivering specialty rental rate growth of 4.9 per cent in the 2012 financial year. Occupancy remains steady at 98.6 per cent with a healthy same property net operating income (NOI) growth of 3.5 per cent.

Neighbourhood and sub-regional centres in particular, which represent the majority of the portfolio, continue to outperform other retail centre types with same property NOI growth of 4.2 per cent, specialty rental rate growth of 5.8 per cent and occupancy of 98.0 per cent.

“The REIT’s Australian portfolio, which represents 91% per centof net tangible assets (NTA), continues to report stable occupancy and income growth driven by robust underlying performance of the Coles and Woolworths anchor tenants, highlighting the resilience of these non-discretionary retailers,” Scott Dundas, fund manager of Charter Hall Retail REIT, said.
However, the value of the Australian portfolio also reduced marginally (by 0.5% or $8.5 million) during the six months to June 2012 mainly due to an expansion of capitalisation rates of the REIT’s two household retail assets from 8.94 per cent to 9.73 per cent and acquisition costs incurred during the period of $5.7 million.

In line with its focus on the Australian non-discretionary sector, the REIT acquired four assets for $160 million, reflecting an average initial yield of 8.5 per cent. All properties are anchored by a high turnover Coles or Woolworths supermarket and have strong property fundamentals with combined occupancy of 98.3 per cent and long term anchor WALE of 11.5 years. Work has commenced on four shopping centre redevelopment projects across the portfolio with a total development value of $80.8 million.

 Looking forward, the company indicated it will continue to enhance its property returns and complete the re-weighting to Australia by realising equity from its other offshore assets.
 “Given the continued resilience of the non-discretionary retail market and with 84 per cent of the REIT’s Australian portfolio consisting of high quality neighbourhood and sub-regional shopping centres, the REIT is well positioned as we move into 2013 financial year and beyond,” Dundas said.
The REIT expects operating earnings for the 2013 financial year to be in the range of 85 per cent and 95 per cent of operating earnings.